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OPEC strikes deal to increase oil production

Posted on Sunday, June 24, 2018 by Elliot Roberts

Crude Oil

Zanganeh has said the president is to blame for high prices because of his unilateral withdrawal from the worldwide nuclear agreement and the imposition of fresh sanctions that could significantly curb Iran's crude exports.

Zanganeh, speaking to reporters on the sidelines of a Vienna seminar earlier this week, accused Trump of trying to politicize OPEC and said it was United States sanctions on Iran and Venezuela that had helped push up prices.

The 24 nations in the supply-cut pact, known as OPEC+, agreed in late 2016 to trim production by 1.8 million barrels a day but they have actually been keeping some 2.8 million barrels per day off the market.

Prices of Brent Crude were down to $73.34 on Thursday, after highs earlier this month of around $80, while United States light crude CLc1 dropped $1 to $64.71.

Saudi Energy Minister Khalid al-Falih said the world could face a supply deficit of up to 1.8 million barrells a day in the second half of 2018.

Meanwhile, oil prices ended lower on Tuesday as investors awaited the upcoming OPEC meeting. That arrangement has cleared a global glut of crude oil that sent oil prices spiraling from more than $100 a barrel in 2014 to less than $30 a barrel in 2016.

Brent oil prices were up 1.9 per cent on Friday as the output boost had been largely priced in and was seen as modest.

Iran's oil minister has walked away from negotiations with other major oil producers over a significant increase in oil production advocated by Russian Federation and Tehran's archrival, Saudi Arabia. He acknowledged not all of the cartel's members could increase output, in a reference to countries such as Venezuela.

Iran says that OPEC and other major oil producers should stick with an agreement that curbs output.

Iran has so far been the main barrier to a deal, with Zanganeh saying on Wednesday OPEC should not yield to pressure from U.S. President Donald Trump to raise output.

Most analysts agree that the increases are necessary to offset the declines in Venezuela due to the economic turmoil, and the drop in Iranian exports because of USA sanctions. Ministers at the event have also indicated that Iran, which was expected to oppose an increase might now agree to a production hike. In the past year, many promised to prioritize spending discipline over production expansion after previously rushing to pump more oil when prices recovered. Iran is usually not part of the committee, which includes Russia, Saudi Arabia, the UAE, Oman, Kuwait, Algeria and Venezuela. In September, we will review the situation in the market and decide the future course, ' he said.

Analysts expect OPEC to announce an increase in production of 500,000 to 600,000 barrels per day (bpd), which would help ease tightness in the oil market but would not be enough to create a glut.